Slide 1: Fourth Quarter 2016 Earnings Conference Call
Regal Beloit Corporation Fourth Quarter 2016 Earnings Conference Call February 7, 2017 Mark Gliebe Jon Schlemmer Chairman and Chief Operating Officer Chief Executive Officer Chuck Hinrichs Robert Cherry Vice President Vice President Chief Financial Officer Investor Relations ©2016 Regal Beloit Corpo
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by term
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures We prepare financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). We also periodically disclose certain financial measures in our quarterly earnings releases, on investor conference calls, and in investor presentati
Slide 4: Agenda and Opening Comments
Agenda and Opening Comments Opening Comments Mark Gliebe Financial Update Chuck Hinrichs Segment Update Jon Schlemmer Summary Mark Gliebe Q&A All 4
Slide 5: Opening Comments – 4th Quarter Results
Opening Comments – 4th Quarter Results Overall Results In Line with Our Expectations Organic Growth Down Slightly at (0.7%) – Climate Organic Growth up 3.0% with Strong Residential HVAC Partially Offset by Weakness in the Middle East – C&I Organic Growth Slightly Up with Oil & Gas Markets Still
Slide 6: Opening Comments - Looking Forward
Opening Comments - Looking Forward Expecting Positive Organic Growth in 2017 – Two-Way Material Price Formulas to Be a Tailwind to Sales – Oil & Gas and Middle East Comparisons to Improve – Residential and Commercial HVAC Markets to Grow Mid-Single Digit – Impact of Strong Dollar on U.S. Industria
Slide 7: 4th Quarter 2016 Financial Results
4th Quarter 2016 Financial Results Sales of $758.1 Million, Down 2.0% – Foreign Currency Translation of (0.7%) – Business Divestiture (0.6%) – Organic Sales* of (0.7%) Adjusted Operating Margin* of 9.5% – Included $14.5 Million LIFO Expense, Not Included in our Earlier Guidance – 4Q15 Included $
Slide 8: 4th Quarter 2016 Financial Results
4th Quarter 2016 Financial Results ADJUSTED DILUTED EARNINGS PER SHARE* Three Months Ended Twelve Months Ended Dec 31, Jan 2, Dec 31, Jan 2, 2016 2016 2016 2016 GAAP Diluted Earnings (Loss) Per Share $ 1.01 $ (0.43) $ 4.52 $ 3.18 Goodwill Impairment - 1.30 - 1.29 Venezuelan Asset Write Down - 0.29 -
Slide 9: 4th Quarter 2016 Key Financial Metrics
4th Quarter 2016 Key Financial Metrics Capital Expenditures Effective Tax Rate (ETR) $19 Million in 4Q 2016 17% ETR in 4Q 2016 $65 Million in FY 2016 LIFO Expense Impacted Mix of Earnings, Restructuring Reducing ETR $2.6 Million in 4Q 2016 $6.8 Million in FY 2016 Balance Sheet at Decembe
Slide 10: 2017 Full Year Guidance
2017 Full Year Guidance Growth in 2017 Organic Sales, FX Headwind Improvement in 2017 Adjusted Operating Margin FY 2017 GAAP EPS Guidance of $4.35 to $4.75 FY 2017 Adjusted EPS* Guidance of $4.50 to $4.90 − Restructuring Costs of $9 Million, or $0.15 EPS Key Assumptions: − Capital Expendit
Slide 11: Commercial & Industrial Systems
Commercial & Industrial Systems 4Q 2016 Key Thoughts AHR Expo Feature - UlteMAX™ Sales Standard UlteMAX™ • $369 Million Industrial Motor Motor & Control • Organic Sales* Up 0.5% • 3rd Consecutive Quarter of Improvement • Strength in Data Centers and Pump Offset by Weakness in Oil & Gas and Power Gen
Slide 12: Climate Solutions
Climate Solutions 4Q 2016 Key Thoughts AHR Expo Feature - DEC Star™ Sales Regal’s Customer Unit • $215 Million DEC Star™ With DEC Star™ • Organic Sales* Up 3% • 4th Consecutive Quarter of Improvement • Low Double-Digit Growth in NA Resi HVAC Adj Operating Margin* • 12.8% of Sales Benefits • Up Subst
Slide 13: Power Transmission Solutions
Power Transmission Solutions 4Q 2016 Key Thoughts AHR Expo Feature Sales • $174 Million • Organic Sales* Down 7% • Lower Renewable Energy and Oil & Gas Demand Adj. Operating Margin* • 13.3% of Sales • Cost Actions, Synergies and SG&A Benefits Benefitted Adj. Operating Margin • Leveraging Browning® B
Slide 14: Simplification Update
Simplification Update Consolidation of Closure of Consolidation of China Monterrey Mexico India Small Motors HVAC Motors Large Motors Exiting 3 Rooftops, Expecting Benefits in Late 2017 and 2018 14
Slide 15: Customer Recognition
Customer Recognition Performance Excellence Customer Recognition A key component of the Regal Business System OEM Award Focused on Continuous Improvement Resulted in a 2 point improvement in delivery Resulted in a 38% improvement in delivered quality Continuous Improvement Customers Recogniz
Slide 16: Border Adjustability Tax
Border Adjustability Tax Discussion 16
Slide 17: 4th Quarter Review
4th Quarter Review 4th Quarter Results in Line with Expectations Sales Down Slightly Operational Improvements Offset the $14.5 Million LIFO Expense Delivered 202% Free Cash Flow* to Net Income and Reduced Debt by $100 Million • Non-GAAP Financial Measurement, See Appendix for Reconciliation.
Slide 18: Full Year Review
Full Year Review Full Year 2016 Results – 17 Day Reduction in Cash Cycle Days** – Free Cash Flow* 184% of Net Income – $315 Million Debt Reduction – 20% Total Shareholder Return*** Building Momentum into 2017 – Significant Progress on Simplification – Investing in Innovative New Products – Custo
Slide 19: Questions and Answers
Questions and Answers ©2016 Regal Beloit Corporation, Proprietary and Confidential
Slide 20: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Twelve Months Ended Dec 31, Jan 2, Dec 31, Jan 2, 2016 2016 2016 2016 GAAP Diluted Earnings (Loss) Per Share $ 1.01 $ (0.43) $ 4.52 $ 3.18 Goodwill Impairment - 1.30 - 1.29 Venezuelan Asset Write Down - 0.29 - 0
Slide 21: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Three Months Ended Commercial & Industrial Power Transmission ADJUSTED OPERATING INCOME Systems Climate Solutions Solutions Total Regal Dec 31, Jan 2, Dec 31, Jan 2, Dec 31, Jan 2, Dec 31, Jan 2, 2016 2016 2016 2016 2016 2016 2016 2016 GAAP Income (Loss) from Operat
Slide 22: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations FREE CASH FLOW RECONCILIATION Three Months Ended Twelve Months Ended Dec 31, Jan 2, Dec 31, Jan 2, 2016 2016 2016 2016 Net Cash Provided by Operating Activities $ 111.2 $ 113.9 $ 439.6 $ 381.1 Additions to Property Plant and Equipment (19.1) (26.8) (65.2) (92.2) Fre
Slide 23: Appendix Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations ADJUSTED OPERATING MARGIN WITHOUT LIFO Three Months Ended Twelve Months Ended Dec 31, Jan 2, Dec 31, Jan 2, 2016 2016 2016 2016 Adjusted Income from Operations $ 72.2 $ 79.5 $ 314.1 $ 382.3 LIFO Expense (Benefit) 14.5 (15.3) 14.5 (18.8) Adjusted Income from Operatio
Slide 24: Appendix Regal Shipping Days
Appendix Regal Shipping Days 1Q 2Q 3Q 4Q FY 2014 63 63 63 64 253 2015 64 63 64 59 250 2016 64 64 63 60 251 2017 64 63 63 60 250 Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 Fiscal Years 2015, 2016 and 2017 have 52 weeks Fiscal Year 2014 had 53 weeks